Bank of Canada maintained the 0.50% setting for the policy rate, matching widespread expectations. They remained optimistic on the prospects for an improvement in growth, but were a bit more cautious than in April, saying “The fundamentals remain in place for a pick-up in growth over the projection horizon, albeit in a climate of heightened uncertainty.” The GDP projection for 2016 was cut to 1.3% from 1.7% in April. GDP in Q2 of this year is seen falling 1.0% due to the impact of the Alberta wildfires, but they see above potential growth in 2H 2016. Inflation is seen returning to 2% in 2017. The expected closure of the output gap has been moved to the end of 2017 from the “second half of 2017” estimate in April. The risks to the profile for inflation were judged to be “roughly balanced,” although they acknowledged that the “implications of the Brexit vote are highly uncertain and difficult to forecast.” As for financial vulnerabilities, those are “elevated and rising, particularly in the greater Vancouver and Toronto areas.” Overall, the announcement and MPR are consistent with our ongoing projection for no change in the current policy setting for an extended period of time.
USDCAD fell to 1.2962 lows from just over 1.3070 following the BoC announcement, where rates were left unchanged, as expected. The CAD reaction was a bit of a surprise given the BoC’s statement was a bit downbeat from the last meeting, alluding to increased “uncertainty. GDP projections were downgraded as well. Given the recent run-up in USDCAD, the market was perhaps just long enough to keep further gains out of the picture.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! The next webinar will start in:
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.